A parsimonious model to forecast financial distress, based on audit evidence

Piñeiro Sánchez Carlos (), Llano Monelos Pablo De () and Rodríguez López Manuel ()
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Piñeiro Sánchez Carlos: University of a Coruña
Llano Monelos Pablo De: University of a Coruña
Rodríguez López Manuel: University of a Coruña

Contaduría y Administración, 2013, vol. 58, issue 4, 151-173

Abstract: This paper provides evidence that audit reports convey relevant evidence for inferring the existence of underlying, unrevealed, financial imbalances. Unlike previous works, which studied US listed-firms bankruptcy, our research deals with Spanish non-financial SMEs under financial stress. Our results indicate that the audit of distressed SMEs has several distinctive features: higher auditor rotation, more qualified reports, and non-compliance with deadlines to approve and file the annual financial statements. We use this evidence to build and test a parsimonious and reliable forecast model. Several implications for auditors’ independence, information quality, and failure forecast are discussed.

Keywords: tensión financiera; pronóstico de fallo; calidad de la auditoría; regresión logística (search for similar items in EconPapers)
Date: 2013
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Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:nax:conyad:v:58:y:2013:i:4:p:151-173

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